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How Coronavirus pandemic will impact this year’s appraisal cycle

These unprecedented times have put organizations in a predicament on how to deal with performance appraisals, its impact on pay raises, retention of top talent and the overall morale of employees.

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90% of the 315 organisations that participated in the survey had at least one 1 initiative around the week-being of the employees, while some also had as many as 5 initiatives to help employees.

As the global economy is struggling to cope with the onslaught of coronavirus pandemic, we have already started feeling its impact on key business and people processes across industries. The potential cost of this outbreak at this point is difficult to calculate as we are still trying to combat this crisis situation. However, we can see how various organizations are getting affected by this pandemic.

The current state of affairs and low or no demand in the market has led all organizations across sectors to cut down on essential operations. The worst hit are the aviation, travel, hospitality and tourism sector by the lockdowns. The automobile industry too is facing severe supply chain interruptions due to the outbreak impacting its operations. The financial impact of the crisis is likely to reflect in salary raises and bonus disbursements across organizations and these sectors are likely to be the worst hit.

Also, the prolonged period of economic slowdown before the virus pandemic is expected to impact the pay-outs this year. Salaries of Indian employees were expecting an average hike of 9.1 per cent in the year 2020. This increase in salary was pegged to be the lowest in the decade, according to a study by Aon, reflective of the economic slowdown we were experiencing. But after the pandemic hit the global economy, the effect is going to be greater. We may expect delays in increments, for many organizations are taking the wait and watch approach to assess the current situation. Also, we should expect hikes to be conservative with larger impact on bonus pay-outs than fixed pay increases as they are reflective of the business performance of any organization.

These unprecedented times have put organizations in a predicament on how to deal with performance appraisals, its impact on pay raises, retention of top talent and the overall morale of employees.

A report by a leading financial newspaper said India’s IT services could freeze pay hikes and cut bonuses to cope with the losses it bears due to the Covid-19 pandemic.

Many organizations have communicated the financial impact this pandemic may have on its employees. Like Google has confirmed delaying employee performance reviews and promotions due to the coronavirus pandemic. Apollo Tyres announced that its top management will take a cut in compensation, in the range of 15% to 25%. State-run Air India too has announced reduction in allowances.

Currently employees too are going through anxious times and are vulnerable to rumours and speculations around appraisals and salary hikes which can undermine employee morale. So while economic crunch is a reality, let us not forget that tis too shall pass. And our greatest assets are our employees.

It is these times of crisis that employers can build a loyal, engaged and motivated workforce by being prudent and transparent in their decisions and communication. It’s time to communicate and manage employee expectations. This calls for organizations to be proactive and clearly communicate the financial impact of the current crisis on sales and profitability to their employees and how it links up to bonus and salary raises. This will not only help them justify the compensation adjustments they plan to implement in the future but also will help in keeping the morale of employees and future turnover under check.

At a time when organizations are looking at innovative ways to ensure business continuity, they cannot afford to lose its top talent. Hence, during such times rather than postponing, having appraisal discussions will help with focus on future development and expectations will help. Additionally, more than instant monetary incentives identified talent needs to be told they are high performers through appraisals to retain them. Appraisal discussions will also help reduce apprehensions amongst employees and bring in more transparency as communication, which during these times is vital. It’s important to note that one should not let the severe downturn of the last few weeks to impact employee ratings.

This coronavirus pandemic has put businesses under testing times where they need to take tough decisions but also provides them with the opportunity to reflect, revisit their approach, look at ways to reduce additional costs, be innovative, bring in viable business continuity models and most importantly learn to deal with these tough times resiliently, while taking their teams along. It is these teams that will help organisations bounce back when the time is right.

(By Sonica Aron, Managing Partner, Marching Sheep)

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